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The Impact of Mystery Customers on EmployeesDr Alex Douglas, Reader in Service Quality Management, Liverpool BusinessSchool, Liverpool John Moores University, UK;Email: a.douglas@ljmu.ac.uk98 Mount Pleasant, Liverpool, Merseyside, L3 5UZ, UK.Jacqueline Douglas, Senior Lecturer in Quality Management, Liverpool BusinessSchool, Liverpool John Moores University, UKEmail. j.a.douglas@ljmu.ac.ukDr John Davies, Senior Lecturer in Quality Management, Salford BusinessSchool, University of Salford, UK.Email: j.davies@salford.ac.ukKeywords: Stress, Ethics, Service Quality Measurement and ImprovementCategory: Research paperIntroductionThe service encounter has quite rightly been described as the Moment of Truth(MOT). It is that moment in time when an employee of an organisation directlyinteracts with a customer or potential customer. That interaction provides theorganisation with both an opportunity and a threat depending on how the scenariounfolds. It is an opportunity to demonstrate quality, build trust and increase loyalty. Itis a threat because it can be critical in determining perceptions of quality and so ifthings go wrong the outcome can be a dissatisfied customer and reduced loyalty.Despite increases in remote (internet) and telephone encounters the most usual formof interaction takes place face-to-face. The challenge for any organisation’smanagement is to try to control, measure and improve the quality of such serviceencounters. The main difficulties with such a task are associated with, inter alia, theheterogeneous nature of services, their perishability, their blend of tangible andintangible elements and the fact that consumption takes place simultaneously withproduction (Fitzsimmons and Fitzsimmons, 2004). Customer satisfaction surveys,focus groups, complaints data, mystery customer programmes and peer appraisal aresome of the traditional methods utilised by management to try and gauge the qualityof their service delivery processes and people. Management clearly recognise that the

service delivery process is important in relation to customer satisfaction (Wilson,2000).Aims and ObjectivesThis paper seeks to explore the role and use of mystery customers within the contextof customer intelligence gathering. The concept will be described, its perceivedadvantages and disadvantages identified and the impact of their use assessed. Themain aim of this paper is to determine the impact of mystery customers on employeesand their performance to determine whether the reported advantages anddisadvantages of this method of measuring the quality of the service encounter andbeyond are achieved in practice. This main aim will be achieved through the analysisof empirical data collected from a questionnaire survey of employees of one majorUK High Street retailer.Definitions and ScopeMystery Shopping is not new. It was pioneered in the USA in the 1940s, over 60years ago. Today the Mystery Shopping Industry, the focus of this research, is agrowth industry ( 1.5 billion world-wide). The Mystery Shopping ProvidersAssociation has 150 member companies world-wide. More than 8 million MysteryShops were conducted in the USA in 2004 predominantly in retailing, banking andfinance and the fast food sector (www.mysteryshop.org/ 2005). Mystery Customersare used extensively within service organisations within the UK to assess customerservice, monitor front line performance and to benchmark against competitors’performance (Finn and Kayende, 1999). In particular they are used in retailing,banking and financial services, transport services, public services and within thetourism, hospitality and leisure sectors.The Market Research Society (MRS, 2003) defines mystery customers as “individualstrained to experience and measure any customer service process, by acting aspotential customers and in some way reporting back on their experience in a detailedand objective way”.The main aims of Mystery Shopping are:(a)To provide customer intelligence. This has two objectives. Firstly toidentify where people and processes are not performing as theyshould, and secondly to motivate staff by linking performance withrewards and training needs.(b)To provide competitive intelligence by using data collected oncompetitors as a benchmark against which performance can becompared. Indeed some organisations used the data to benchmarkthe performance of different outlets.Harvey (1998) recognises two differing modus operandi. The first uses a professionalwho poses as a customer and evaluates various aspects of the service encounter usinga checklist as an aide memoire. These professionals can either be employed asMystery Customers on a full or part-time basis. In other words their “day job” may besomething completely unrelated. Based on the information noted in the checklist adetailed report is then prepared. The second utilises actual customers who are trainedto make detailed notes based on their shopping encounters that are then handed overto the service management at regular intervals.

Guidelines on mystery shopping (MSPA Europe, 2004) state that such a study should"review how staff and processes perform against pre-determined standards during aninteraction" with the aim of improving both and increasing customer satisfaction.Within the limited literature available on this subject the general consensus is thatoperating mystery customer programmes provides an in-depth insight into customers'perceptions and provides a positive method of service performance measurement thatis welcomed by “good” employees (see for example, Bromage, 2000; Erstad, 1998;Finn and Kayende, 1999; Hesselink and van der Wiele; Leech, 1995; Wilson, 1998;and Zeldis, 1988). Van der Wiele et al (2005) argue that their use can also have apositive impact on organisational changes to the service processes required to deliverexcellence. Collins and Turner (2005) concur and argue that if used correctly mysteryshoppers can produce "fundamental changes in the performance and culture of acompany" if used correctly. This means transparency in their use and with “carrotsrather than sticks”. However, the technique is not without its critics.Methodological IssuesMystery shopping is a form of participant observation, albeit that the observation iscarried out secretly (Calvert, 2005). Jesson (2004) with particular reference topharmacy practice, questions whether mystery shopping techniques aremethodologically sound and ethically and morally justifiable ways of collecting dataon performance. Specifically, the method and sample sizes have been criticised fromreliability and validity aspects. In order for the data to be valid and reliable Hesselinkand van der Wiele (2003) argue that the mystery shopping study has to be welldesigned with particular attention on the process itself, the data gathering process, theperson doing the study (the mystery customer) and the reporting process. Finn andKayende (1999) went further by utilising Cronbach et al's (1972) generalizibilitytheory to recognise that there were a number of variable facets of a mystery shoppingstudy that would impact on the observed performance evaluation, including the timeof day (or night) that the observations were made, the type of transaction beingevaluated, the particular employee being assessed, the process being evaluated and theparticular outlet being studied. They went on to examine the psychometric quality ofmystery shopping data and concluded that the data collected hold up to reliability andvalidity tests particularly when compared to data collected from customer surveys.The issue of generalisability is more contentious and Jesson (2004) argues thatbecause mystery customer methods are context and attitude-free any generalisationsmade do not take into consideration any local situations applying at the time theobservations were made. Collins and Turner (2005) argue that although sample sizesare small each observation is valid in its own right since it is a "snap-shot" of theservice experience at one moment in time and as such is not trying to represent the"population" of all such experiences. Thus for them generalisability is not an issueand the data collected should be analysed within the context it was collected.Ethical IssuesPunch (1994) believes that the subject of research has the right to be informed thats/he is being researched and the nature of that research. In order for the use ofMystery Customers to be ethical, any organisation using them should advise theirstaff that they will be used periodically to check their service delivery performance. Inaddition staff should also be appraised of the objective and intended use of the results

of a mystery customer study. The MSPA guidelines state that any studies "must not beused as the sole reason for dismissals and reprimands" (MSPA Europe, 2004). What ismore problematic is where mystery customers are used to gather competitorintelligence. Competitors' staff do not know they are being observed. Shing andSpence (2002) argue that their use to gather competitive intelligence is akin toindustrial espionage and conclude that in such cases mystery shopping is "difficult todefend ethically".The UK Government in their recent Code of Practice on Consultation (CORIU, 2004)stated that mystery customer programmes can be used to gather specific and detailedfeedback on areas of service and commends it as a simple process, but withlimitations. It is the advantages and disadvantages that are examined in the nextsection.Advantages and Disadvantages of Using Mystery CustomersThe scant literature on the use of the mystery customer concept identifies a number ofadvantages in its use: It enables the evaluation of processes not outcomes, and importantly thisevaluation occurs at the time of the service delivery, i.e. ‘measuring theservice as it unfolds’ (Wilson, 1998). This avoids one of the main pitfalls ofpost-service delivery survey methods, that of ‘misremembering’ by thecustomer. It also enables a ‘customer’ to evaluate the service delivery processwith a view to improving a process that can be seen to actively work againstthe provision of high quality services;It recognises the ‘genuine desire among employees to provide good customerservice’ (Erstad, 1998);It collects facts, not perceptions. The mystery customer questionnaire orchecklist should emphasise objective questions with a view to collectingfactual data, again negating another weakness of customer surveys, i.e. thatcustomers only remember their overall impression of a service and not theindividual elements or transactions (Wilson, 1998);It gathers subjective data as well as objective data (Hesselink and van derWiele, (2003)It is an integral training tool in that it can be used to identify training needs(Bromage, 2000);It can be a positive, motivational tool for employees (Erstad, 1998; Zeldis,1988);It can bring immediate service improvements with continuous improvementpossibilities (CORIU, 2004).Some of the disadvantages include: It can be viewed as threatening to employees, in that staff may view the use ofmystery customers as management checking on their performance with a viewto instigating some form of disciplinary action, rather than as a trigger for stafftraining and development (Erstad, 1998);